EXHIBIT 1O.2.5
COINSURANCE AGREEMENT
THIS COINSURANCE AGREEMENT, made and entered into as of the 1st day of
October, 1990, by and between MASSACHUSETTS GENERAL LIFE INSURANCE COMPANY
("Ceding Insurer"), a Massachusetts corporation, with principal offices located
at 0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, and FIRST FINANCIAL
LIFE INSURANCE COMPANY ("Reinsurer"), an Arizona corporation, with principal
offices located at Phoenix, Arizona, and with administrative offices located at
0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000.
W-I-T-N-E-S-S-E-T-H
WHEREAS, Ceding Insurer, Reinsurer, WABASH LIFE INSURANCE COMPANY, a
Kentucky corporation and an affiliate of Ceding Insurer, and FIRST FINANCIAL
MARKETING SERVICES ("Marketing Company"), a Florida corporation and an affiliate
of Reinsurer, entered into a Marketing Agreement (herein so-called) effective
February 23, 1989;
NOW, THEREFORE, in consideration of the premises and the mutual promises of
the parties hereto, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Definitions. Except as otherwise indicated herein, all terms used in
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the Marketing Agreement shall have the same meaning in this Coinsurance
Agreement. In addition, the following terms shall mean:
1.1 "Abatement " means the termination of the provisions of this
Coinsurance Agreement relating to the cession of additional Insurance Business
Produced, but excludes the termination of the remaining provisions of the
Coinsurance Agreement.
1.2 "Accounting Period" means each calendar quarter ending on March 31,
June 30, September 30 and December 31 of each year.
1.3 "Beginning Calendar Year" means the period commencing with the
effective date of this Coinsurance Agreement and ending December 31,1990.
1.4 "Calculation Period" means the Beginning Calendar Year, the Ending
Calendar Year and each Calendar Year occurring in between them.
1.5 "Calendar Year" means each twelve month period beginning January 1st
and ending December 31st.
1.6 "Ending Calendar Year" means the period commencing on January 1st of
the year in which this Coinsurance Agreement is Abated and ending on the date of
Abatement.
1.7 "First Year Paid Life Insurance Premiums" means the life insurance
premiums received by the Ceding Insurer on the Policies reinsured hereunder
during the first year each of such Policies is in effect, exclusive of (i) lump
sum cash deposits in excess of published premium rates and (ii) premiums for
flexible premium life insurance contracts in excess of control premiums.
1.8 "Gross Premium" means all of the paid premiums received by Ceding
Insurer on the Policies reinsured hereunder including (i) lump sum cash deposits
in excess of published premium rates and (ii) premiums for flexible premium life
insurance contracts in excess of control premiums.
1.9 "Quota Share" means for any given Calculation Period, a fifty percent
(50%) undivided interest in the Insurance Business Produced.
1.10 "Reserve Liability" means the actuarial reserves relating to the
Policies reinsured hereunder as reported in Exhibit 8 of Ceding Insurer's Annual
Statement prepared on forms prescribed by the National Association of
Insurance Commissioners ("NAIC Statement"). Such reserves shall be determined on
the same basis as that used by the Ceding Insurer in computing its Reserve
Liability.
1.11 "Termination" means the termination of all of the provisions of this
Coinsurance Agreement and includes the recapture by Ceding Insurer of all
Policies previously reinsured hereunder.
2 Reinsurance. The Ceding Insurer hereby agrees to cede and Reinsurer
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agrees to assume and reinsure from Ceding Insurer, on a coinsurance basis,
Reinsurer's Quota Share of the life insurance policies listed in Appendix "1",
which is attached hereto and incorporated herein (hereinafter referred to as
"Policies"); all of which were previously issued or assumed by Ceding Insurer,
and which are in force as of the Effective Date hereof (as hereinafter defined).
2.1 This Coinsurance Agreement is an indemnity reinsurance agreement
solely between the Ceding Insurer and the Reinsurer and, except as otherwise
provided herein, the performance of the obligations of each party hereunder
shall be rendered solely to the other party. Except as otherwise provided
herein, no person other than Ceding Insurer and Reinsurer shall have any rights
under this Coinsurance Agreement and the Ceding Insurer shall be and remain
solely liable to any insured, policyowner, or beneficiary under the Policies
reinsured hereunder.
2.2 Reinsurer shall, except for Policy Issue Expenses and Policy
Maintenance Expenses and Premium Taxes, share with the Ceding Insurer, on the
basis of Reinsurer's Quota Share, in all transactions relating to the Policies
reinsured hereunder, including, without limitation:
(a) All premium transactions effected.
(b) All Commissions, fees and bonuses paid to or for the benefit of
the General Agents.
(c) All policy benefits paid.
(d) All policyholder dividends paid.
(e) All nonforfeiture benefits paid.
2.3 Except as provided herein, the liability of Reinsurer with respect to
the Policies reinsured hereunder shall begin and end simultaneously with the
liability of the Ceding Insurer.
2.4 Reinsurer's Quota Shore of reinsurance hereunder shall be maintained
in force as to the Policies reinsured hereunder without reduction so long as the
amount of insurance for which the Ceding Insurer is obligated under such
Policies remains in force without reduction.
3. Consideration and Reserves. Coding Insurer and Reinsurer agree as
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follows:
3.1 Reinsurer agrees to pay to Ceding Insurer a ceding commission of
$2,984 cash.
3.2 Reinsurer agrees to assume and fund its Percentage Share of the
Reserve Liability on the Policies. Reinsurer's Percentage Share of the
Reserve Liability on the Policies as of the Effective Date was $18,148.
Ceding Insurer may inspect the books of Reinsurer at any reasonable time to
ascertain that such Reserve Liability is so maintained.
3.3 Ceding Insurer agrees to promptly assign, convey and transfer to the
Reinsurer assets deemed to be admitted assets and which qualify as reserve
assets within the meaning of the Massachusetts and Arizona Insurance Codes
("Admitted Assets") that have a value as determined in accordance with such
Insurance Codes ("Admitted Asset Value") of $18,148, which Admitted Assets
shall include Reinsurer's Percentage Share of the net due and deferred premiums
on the Policies which, as of the Effective Date, was $0.
4. Expenses. Except as otherwise provided herein, Ceding Insurer shall
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bear all expenses relating to the issuance and maintenance of the Policies
reinsured hereunder.
4.1 For purposes of this Coinsurance Agreement, Policy Issue Expenses
(herein so-called) for each new Policy reinsured hereunder and Policy
Maintenance Expenses (herein so-called) for each Policy reinsured hereunder are
detailed in Schedule A (attached). Reinsurer shall reimburse the Ceding Insurer
for Policy Issue Expenses and Policy Maintenance Expenses in an amount equal to
Reinsurer's Quota Share of the Policies reinsured hereunder, expressed as a
percentage of the Policy Issue Expenses and the Policy Maintenance Expenses.
4.2 Service Fees shall be paid by the Reinsurer as detailed in Exhibit C
of the Marketing Agreement, effective February 23, 1989, (the Administrative
Services Agreement) for the duration the business described herein remains in
force.
4.3 Premium taxes shall be calculated as two percent (2%) of Collected
Quota Share Premium.
5. Payments By Ceding Insurer. Within 60 days after the end of each
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Accounting Period, Ceding Insurer shall deliver to Reinsurer an accounting with
respect to all Policies reinsured hereunder and Ceding Insurer shall pay to
Reinsurer the sum of:
(a) Reinsurer's Quota Share of Gross Premiums for such Accounting
Period.
(b) Reinsurer's Quota Share of Policy loan interest for such
Accounting Period.
5.1 All sums due Reinsurer shall be offset, to the extent applicable,
against all sums due Ceding Insurer under Paragraph 6 below.
6. Payments By Reinsurer. Within 60 days after the end of each Accounting
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Period, Reinsurer shall pay to Ceding Insurer the sum of:
(a) Reinsurer's Quota Share of all disbursements made by Ceding
Insurer with respect to the Policies for such Accounting Period (other
than disbursements relating to Policy Issue Expenses and Policy
Maintenance Expenses and Premium Taxes) including, without limitation,
all death benefits, nonforfeiture benefits, matured endowments,
disability waiver of premium benefits, policyholder dividends, policy
loans, commissions and bonuses and Reinsurer agrees that it will pay
all costs and expenses incurred by it or on its behalf in connection
with the retrocession of any liability on the Policies reinsured
hereunder.
(b) Reinsurer's Quota Share of all Policy Issue Expenses, Policy
Maintenance Expenses, Premium Taxes and Service Fees for such
Accounting Period.
6.1 All sums due Reinsurer shall be offset, to the extent applicable,
against all sums due Reinsurer under Paragraph 5 above.
7. Reinsurance Accounting and Reporting
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7.1 Ceding Insurer shall administer the Policies and perform all
accounting. Accounting shall be on a bulk basis at the end of each Accounting
Period.
7.2 Ceding Insurer shall provide Reinsurer with all information, if any,
used in preparing Ceding Insurer's Federal Income Tax Return (Form 1120L) which
is necessary for Reinsurer to complete its return with respect to the
reinsurance hereunder on a timely basis.
8. Retrocession. Reinsurer agrees that its retrocession of any liability
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on the Policies reinsured hereunder will not relieve Reinsurer from any
liability assumed hereunder by Reinsurer. Reinsurer agrees that it will pay all
costs and expenses incurred by it or on its behalf in connection with the
retrocession of any liability on the Policies reinsured hereunder.
9. Oversight. It is understood and agreed that if failure to comply with
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any terms of this Coinsurance Agreement is shown to be unintentional and the
result of misunderstanding or oversight on the part of either the Ceding Insurer
or Reinsurer, both the Ceding Insurer and Reinsurer shall be restored to the
positions they would have been in had no such misunderstanding or oversight
occurred.
10. Reinstatement. If a Policy reinsured hereunder lapses for nonpayment
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of premium and is subsequently reinstated by the Ceding Insurer under its
regular rules, Reinsurer will automatically reinstate its reinsurance with
respect to such Policy. The Ceding Insurer will promptly notify Reinsurer
regarding any such reinstatement and will pay to Reinsurer its share of premiums
in arrears, with interest at the same rate and in the same manner as received
by the Ceding Insurer in connection with the reinstatement.
11. Misstatement. If the insured's age or sex was misstated and the amount
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of insurance in the Ceding Insurer's policies is adjusted, Ceding Insurer and
Reinsurer will share the adjustment in proportion to the amount of liability of
each at the time of issue of the policies. Premiums will be recalculated for the
correct age or sex and amounts according to the proportion as above, and
adjusted without interest. If the insured is still alive, the method above will
be used for past years. The amount of reinsurance and premium will be adjusted
for the future to the amount that would have been correct at issue.
In the event the amount of insurance provided by a policy or policies
reinsured hereunder is increased or reduced because of misstatement of age or
sex, which misstatement is established after the death of the insured, the net
insurance liability of the Reinsurer shall increase or reduce in the proportion
that the net reinsurance liability of the Reinsurer bore to the sum of the net
retained liability of the Ceding Insurer immediately prior to the discovery of
such missstatement.
12. Settlement of Claims.
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12.1 The Ceding Insurer shall give the Reinsurer prompt notice of any
claim submitted on a policy reinsured hereunder and prompt notice of the
commencement of any legal proceedings in connection therewith. Copies of all
documents bearing on such claim or proceeding shall be furnished to the
Reinsurer when requested.
12.2 The Reinsurer shall accept the good faith decision of the Ceding
Insurer in settling any claim or suit and shall pay at the Ceding Insured's,
Home Office, the Reinsurer's share of net reinsurance liability upon receiving
proper evidence of the Ceding Insurer's having settled with the claimant.
Payment of net reinsurance liability on account of death or dismemberment shall
be made in one lump sum. In settlement of reinsurance liability for Waiver of
Premium benefits, the Reinsurer shall pay to the Ceding Insurer its
proportionate share of the gross premium waived.
12.3 If the Ceding Insurer should contest or comprise any claim or
proceeding, and the amount of net liability thereby be reduced, the Reinsurer's
reinsurance liability shall be reduced in the proportion that the net liability
of the Reinsurer bore to the sum of the retained net liability of the Ceding
Insurer.
12.4 Reinsurer shall share in the claim expense of any contest or
compromise of a claim in the same proportion that the net amount at risk
reinsured hereunder bears to the total net risk retained by the company and the
Reinsurer shall share in the total amount of any reduction in liability in the
same proportion. Claim expense shall include, but not be limited to the
following:
(a) Routine investigative and administrative expenses;
(b) Expenses incurred in conjunction with a dispute or contest
arising out of conflicting claims of entitlement to policy proceeds or
benefits which the Ceding Insurer admits are payable;
(c) Expenses, fees, settlements or judgements arising out of, or in
conjunction with claims against the Ceding Insurer for punitive or
exemplary damages;
(d) Expenses, fees, settlements, or judgements arising out of, or in
conjunction with, claims made against the Ceding Insurer and based on
alleged or actual bad faith, failure to exercise good faith or
tortious conduct; and
(e) Penalties, legal fees and interest including those items imposed
automatically by statute against the Ceding Insurer and arising out of
judgement(s) being rendered against the Ceding Insurer in a suit for
policy benefits reinsured hereunder.
12.5 The Reinsurer shall refund to the Ceding Insurer any reinsurance
premiums, without interest, unearned as of the date of death of the life
reinsured hereunder.
12.6 If the Ceding Insurer pays interest from a specific date, such as the
date of death of the insured, on the contractual benefit of a policy
reinsured under this agreement, the Reinsurer shall indemnify the Ceding Insurer
for the Reinsurer's share of such interest. Interest paid by the Reinsurer under
this paragraph shall be computed at the same rate and commencing as of the same
date as that paid by the Ceding Insurer. The computation of interest paid by the
Reinsurer under this paragraph shall cease as of the earlier of (a) the date of
payment of the Reinsurer's share of reinsurance liability or (b) the date of
termination of the period for which the Ceding Insurer has paid such interest.
13. Inspection of Records. Each party shall have the right at any
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reasonable time during normal business hours to inspect, at the office of the
other party, all books and documents relating to reinsurance under this
Coinsurance Agreement.
14. Insolvency. In the event of the insolvency of the Ceding Insurer, all
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reinsurance shall be payable directly to the liquidator, receiver, or statutory
successor of said Ceding Insurer, without diminution because of the insolvency
of the Ceding Insurer; provided, however, that any obligations of the Cedings
Insurer to Reinsurer shall be offset against the obligations of Reinsurer to
Ceding Insurer.
14.1 In the event of the insolvency of the Ceding Insurer, the liquidator,
receiver, or statutory successor of the Ceding Insurer shall give the Reinsurer
written notice of the pendency of any claim on a Policy reinsured within a
reasonable time, to be not less than thirty days, after such claim is filed in
the insolvency proceeding. During the pendency of any such claim, Reinsurer may
investigate such claim and in the name of the Ceding Insurer (or its liquidator,
receiver, or statutory successor), but at the Reinsurer's own expense, enter an
appearance, in the proceeding where such claim is to be adjudicated and enter
any defense or defenses which it may deem
available to the Ceding Insurer or its liquidator, receiver, or statutory
successor.
14.2 Any expense incurred under this Paragraph 14 by Reinsurer shall be
chargeable, subject to court approval, against the Ceding Insurer as part of the
expense of liquidation to the extent of the proportionate share of the benefit
which may accrue to the Ceding Insurer solely as a result of the defense
undertaken by Reinsurer. Where two or more Reinsurers are participating in the
same claim and majority in interest elect to interpose a defense or defenses to
any such claim, the resulting expense to Reinsurer shall be apportioned in
accordance with the terms of the reinsurance agreement as though such expense
had been incurred by the Ceding Insurer.
15. Abatement. This Coinsurance Agreement may not be Abated until such
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time as the Marketing Agreement has been terminated, after which time this
Coinsurance Agreement may be Abated:
(a) By the mutual consent of the Ceding Insurer and the Reinsurer; or
(a) By Ceding Insurer upon thirty (30) days' written notice to
Reinsurer; or
(c) By Reinsurer upon thirty (30) days' written notice to Ceding
Insurer.
16. Termination. This Coinsurance Agreement may not be terminated until
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such time as the Marketing Agreement has been terminated, after which time this
Coinsurance Agreement may only be terminated:
(a) By the mutual consent of the Ceding Insurer and the Reinsurer; or
(b) By Ceding Insurer in the event of a material breach hereof by
Reinsurer and such breach is not cured or eliminated within thirty
(30) days after receipt of written notice thereof to Reinsurer from
Ceding Insurer; or
(c) By Reinsurer in the event of material breach hereof by Ceding
Insurer and such breach is not cured or eliminated within thirty (30)
days after receipt of written notice thereof to Ceding Insurer from
Reinsurer.
17. Waiver. No delay or omission by either party hereto to exercise any
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right or power arising upon any noncompliance or default by the other party
with respect to any of the terms of this Coinsurance Agreement shall be
construed as a waiver of the right to exercise any such right or power. A waiver
by any of the parties hereto of the fulfillment of any of the covenants,
conditions, or agreement to be performed by any other shall not be construed to
be a waiver of any succeeding breach hereof or of any other covenant, condition
or agreement herein contained. All remedies provided for in this Coinsurance
Agreement shall be cumulative in addition to and not in lieu of any other
remedies available to any party at law, in equity or otherwise.
18. Amendments. This Coinsurance Agreement may not be amended, nor shall
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any waiver, change, modification, consent or discharge be effected, except by
an instrument in writing duly executed by the parties hereto or their respective
successors or permitted assigns.
19. Approvals, Consents, etc. In any instance where agreement, approval,
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acceptance or consent of any party is required to any provision of this
Coinsurance Agreement, such action shall not be unreasonably delayed or
withheld.
20. Force Majeure. Ceding Insurer or Reinsurer shall be excused from
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performance hereunder for any period when either is prevented from performing
any services to be provided hereunder, in whole or in part, as a result of an
Act of God, fire, war, civil disturbance, court order, insurance department
regulatory order, labor dispute, or other cause beyond its reasonable control,
and such nonperformance shall not be a ground for Termination hereof or
assertion of default hereunder. In the event either party hereto shall be
excused from performance under this provision, said party shall use its best
efforts to provide, directly or indirectly, alternative and, to the extent
practicable, equivalent fulfilment of its obligations hereunder.
21. Severability. If any provision of this Coinsurance Agreement is
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declared or found to be illegal, unenforceable or void by any administrative
agency, regulatory body, or court of competent jurisdiction, such finding shall
not effect the remaining provisions of this Coinsurance Agreement, and all other
provisions hereof shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Coinsurance
Agreement to be signed and delivered by their respective officers thereunto duly
authorized as of the date first hereinabove written.
Attest: MASSACHUSETTS GENERAL LIFE INSURANCE
COMPANY
[SIGNATURE ILLEGIBLE] By: [SIGNATURE ILLEGIBLE]
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Secretary President
Attest: FIRST FINANCIAL LIFE INSURANCE COMPANY
[SIGNATURE ILLEGIBLE] By: [SIGNATURE ILLEGIBLE]
--------------------------------- -------------------------------------
Secretary President
APPENDIX 1
ISSUE ANNUAL FACE 09/30/90
POLICY NO. DATE PLAN PREMIUM AMOUNT RESERVES
--------- ---- ---- ------- ------ --------
10UL064793 Aug-90 19007 240 50,000 0
10Ul064530 Aug-90 19008 300 71,200 4
10UL023683 Sep-87 19R0A 438 50,000 1,253
10UL052043 Sep-89 19R0A 2,400 75,000 6,107
10UL040302 Sep-88 19R02 1,839 60,000 2,652
10UL020277 Sep-87 19R05 1,200 70,000 2,398
10UL046073 Mar-89 19R0A 4,347 100,000 20,236
10UL022071 Sep-87 19R0A 900 50,000 3,645
TOTAL 11,664 526,200 36,295
QUOTA SHARES 5,832 263,100 18,148
EXHIBIT 10.2.5
SCHEDULE A
Expense Allowances
Policy Issue Expenses Policy Maintenance Expenses
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Percent of
Per Annualized or Annual Per Per
Product Form No. Policy Control Premium Per Policy * Lapse Death
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Lifetime II UNF-86 27.50 + .35/unit 8% 32.50 + 2% of 12.50 25.00 + 2
premium in force per unit
Lifetime III BRUNF-86 27.50 + .35/unit 8% 32.50 + 2% of 12.50 25.00 + 2
premium in force per unit
* Note: For flexible premium policies, the premium in force is defined as
current units in force multplied by the control premium per unit at
date of issue. The 2% charge is payable to Wabash Life Insurance
Company as dictated in Exhibit C -- Administration Services Agreement.
